Your mortgage rate is too high? Focusing on the rate alone can cost you more
In Ottawa, when the Bank of Canada announces a change in its prime-lending rate, it’s always big news.
The Mortgage Rate is Always News
The media seeks out analysis from economists and banking and business experts. Inevitably, talk turns to how it will affect the housing, real estate and mortgage markets.
So understandably, clients focus on rates when it comes time to get a mortgage.
Especially when we see article headlines like:
“New mortgage rate war looms as BMO cuts 5-year below 3%”
“Investors Group rolls out 1.99% variable rate mortgage”
It’s precisely these types of announcements that spur people to buy. That’s what they’re designed to do! If you can get a mortgage rate for less than 2 or 3 percent, you’ll scramble to jump into the market because “rates have never been better”.
So when you’re looking for help with getting a mortgage, I understand why the last thing you want to hear from your mortgage broker is to ignore the rates.
Know the mortgage penalties
One of my favourite sayings is “the devil’s in the details.” That saying’s never been more appropriate, once you see the terms of the mortgages in the headlines above.
That 5-year, 2.99% mortgage from BMO? It’s 100% closed for 5 years. So if you want to refinance, increase your payments, or transfer your mortgage, you’re going to pay a very large penalty.
That 1.99% mortgage rate from Investors Group? Yup, significant strings attached. You can’t break it unless you sell your home.
Have a mortgage strategy
I know what you’re thinking now: “I’m not planning on breaking my mortgage.”
Which sounds good at the time. Except we know that most mortgages don’t last their full fixed term. Most 5-year mortgages only last 3 to 4 years.
Not just SOME mortgages, but the vast majority!
So why would someone want to be tied to a lender where your only option is to sell your home and pay a huge penalty to break the mortgage? A lot can change in the course of 6 months to a year. Who can truly say they know where they’ll be in 3 to 5 years? What if you want to refinance or transfer your mortgage? Or consolidate debt?
A 5-year mortgage rate isn’t the same as a 5-year plan!
Get a mortgage broker
Good mortgage brokers will interpret the fine print for you. Your typical bank representative will downplay the penalties, if they even choose to clarify them at all. It’s not in their best interest to explain the penalties to you. They’ll tell you all about the great mortgage rates, but to them, it’s up to you to educate yourself and be aware of the penalties.
I’ll work with you to identify your goals and develop a plan that’s right for you and your family, not the bank!